In a typical insurance claim, an insured submits a claim to an insurance company for costs associated with an injury or property damage, and the insurance company pays the claim. Some of the paid claims may be the result of third party fault. For example, a third party driver may have caused an accident that injured the insured. In such a case, the insurance company may be able to recover all or a portion of the amount paid on the claim from the responsible party. As a result, the insured may be required to subrogate the right to sue the at-fault third party in favor of the insurance company. Using the insured's subrogated rights, the insurance company may attempt to recover amounts paid on the claim from any third party responsible for the injury or damage. For instance, if an insured's car is destroyed in an auto accident caused by a third party, the insured's insurance company may pay the insured for the value of the car, and separately seek to recover the amount paid from the third party or the third party's insurance company.
One challenge for the insurance company in attempting to recover money paid on claims is that not all claims are the result of third party fault. For example, a single-car accident in which the driver/insured falls asleep and hits a tree is not likely to have an at-fault third party from which to recover. The insurance company must therefore determine which claims may be due to a third party fault and therefore have subrogation potential.
Currently, insurance companies rely on methods such as claim adjuster referrals and scheduled audits to identify cases in which there is a chance for subrogation and recovery. However, these traditional methods are inadequate because they miss recovery opportunities. Adjuster referrals use an insurance adjuster to manually review a paid claim to make recommendations regarding subrogation. Such a method is inadequate to identify all recoverable claims because the determination of recoverability is subjective, requires experience and knowledge, and is generally a secondary job responsibility for the adjuster. The quality and consistency of adjuster referrals varies, leading to missed recovery opportunities in some cases, while in others valuable resources are spent pursuing unproductive claims.
Scheduled audits are also problematic. In a scheduled audit, large numbers of files are selected either at random or using primitive selection criteria such as a claim amount or claim type. For instance, an insurance company might select for review all claims in which a collision payment was made. The selected claim files are then sent to an auditing company for a “closed claim study,” in which the insurance company is typically charged on a per-file-reviewed basis. The auditing company typically uses specially trained auditors to manually review files to determine if there is a chance for recovery on any of the claims. The process is expensive and time consuming, and its success depends largely on the initial selection of claims to review and the diligence and discretion of the auditors.
Automation of the subrogation potential determination has been difficult because the information required to make the determination is not easily identifiable within a claim file. Subrogation recognition factors are often buried or obscured in adjuster notes that are accumulated over the life of the claim. Moreover, the content and form of a claim file can vary widely from company to company and adjuster to adjuster. Some files may be handwritten and kept on paper, while others may be kept electronically. Recognition and extraction of subrogation information from such files has traditionally been a task requiring extensive manual labor and significant expense.